INDEMNIFICATION AGREEMENT
THIS
INDEMNIFICATION AGREEMENT (the
"Agreement") is made and entered into this 17th day of December, 2007, by
and
among SECURITY NATIONAL LIFE INSURANCE COMPANY, a Utah corporation ("Security
National"), CAPITAL RESERVE LIFE INSURANCE COMPANY, a Missouri corporation
("Capital Reserve"), and the shareholders of Capital Reserve that have executed
the Agreement by Shareholders of Capital Reserve Life Insurance
Company to Sell Shares in Stock Purchase Transaction (the
"Shareholders") (each of the foregoing parties is referred to singly,
as a "Party" and collectively, as the "Parties").
WITNESSETH:
WHEREAS,
on October 9, 2007, Security
National, Capital Reserve, and the Shareholders entered into a stock purchase
agreement (the "Stock Purchase Agreement") in which the Shareholders agreed
to
sell to Security National and Security National agreed to purchase from the
Shareholders all of the issued and outstanding shares of stock of Capital
Reserve in consideration for purchase consideration payable to the Shareholders
on a pro rata basis in an amount equal to the Capital and Surplus of Capital
Reserve as of September 30, 2007, plus the interest maintenance reserve and
the
asset valuation reserve as set forth on the September 30, 0000 Xxxxxxxxx
Xxxxxxxxx Xxxxxxxxx of Capital Reserve, plus $1,037,967, less certain
adjustments set forth in Section 1.2 of the Stock Purchase Agreement (the
"Purchase Consideration"); and
WHEREAS,
the Parties amended the Stock
Purchase Agreement, effective November 26, 2007; and
WHEREAS,
in Section 1.2 of the Stock
Purchase Agreement, the Shareholders acknowledge that on June 8, 2007, Xxxxxxx
Xxxxxxx ("Xxxxxxx"), a former employee of Capital Reserve, filed an action
against Capital Reserve in the Circuit Court of Xxxx County, Missouri (Case
No.
07ALCC00513) (the "Xxxxxxx Litigation") for unpaid bonuses allegedly due
her in
the total amount of $1,486,045, plus interest at the statutory rate of 9%
per
annum until the judgment is paid in full; and
WHEREAS,
if the Xxxxxxx Litigation is
not completely resolved prior to the closing (the "Closing") of the transaction
relating to the Stock Purchase Agreement, the Shareholders agree to deposit
at
Closing $2,100,000 of the Purchase Consideration into an escrow
account (the "Escrow Account") until the Xxxxxxx Litigation has been
completely resolved; and
WHEREAS,
the Shareholders agree to
deliver a signed indemnification agreement to Capital Reserve and Security
National at Closing, in which the Shareholders each agree to indemnify and
hold
harmless Capital Reserve and Security National for any payments made, and
any
damages or losses incurred, by Capital Reserve following the Closing relating
to
a judgment or settlement in the Xxxxxxx Litigation and for the amount in
which
the Adjusted Capital and Surplus on September 30, 2007 exceeds the Adjusted
Capital and Surplus on the closing date to the extent that such payments
have
not been previously made or such damages or losses have not been previously
satisfied by means of an adjustment in the Purchase Consideration at Closing
or
from funds in the Escrow Agreement;
NOW,
THEREFORE, in consideration of the
mutual promises, agreements and covenants contained herein, and other good
and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereto hereby agree as follows:
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1.
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Indemnification.
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(a) Xxxxxxx
Litigation. The Shareholders agree, jointly, severally and
individually, to be liable for and to pay to or reimburse Capital Reserve
and
Security National for any and all payments made, and any and all damages,
obligations, expenses, or losses incurred, by Capital Reserve or Security
National following the Closing by reason of or in any way arising out of
a
judgment or settlement in the Xxxxxxx Litigation, including any attorney's
fees
and related expenses paid or incurred by Capital Reserve in defending itself
in
the Xxxxxxx Litigation, provided that such payments have not been previously
reimbursed or such damages, obligations, expenses, or losses have not been
previously paid or satisfied from funds in the Escrow Account.
(b) Capital
and
Surplus. The Shareholders additionally agree, jointly,
severally and individually, to be liable for and to pay to or reimburse Capital
Reserve and Security National for any and all payments made, and any and
all
damages, obligations, expenses, or losses incurred, by Capital Reserve or
Security National following the Closing by reason of or in any way arising
out
of the Shareholders' required payment to Security National under Section
1.2 of
the Stock Purchase Agreement equal to the amount in which the Adjusted Capital
and Surplus of Capital Reserve on September 30, 2007 exceeds the Adjusted
Capital and Surplus at Closing, provided that such payments have not been
previously made or such damages, obligations, expenses, or losses have not
been
previously satisfied through an adjustment in the amount of the Purchase
Consideration at Closing or by means of payments or reimbursements to Security
National or Capital Reserve from funds in the Escrow Account.
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Indemnification
Procedure.
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(a) Notice. Capital
Reserve and Security National shall, as a condition precedent to their right
to
be indemnified by the Shareholders under this Agreement, give the Shareholders
notice in writing as soon as practicable pursuant to the notice provision
in
Section 4 of this Agreement of any claim made against the Shareholders for
which
indemnification will or could be sought under this Agreement. In
addition, Capital Reserve and Security National shall give the Shareholders
such
information and cooperation as such Shareholders may reasonably require and
as
shall be within Capital Reserve's and Security National's power.
(b) Procedure. Any
indemnification and advances provided for in Section 1 hereof shall be made
no
later than forty-five (45) days after receipt of written notice of Capital
Reserve or Security National. If a claim under this Agreement for
indemnification is not paid in full by the Shareholders, Capital Reserve
and
Security National may at any time thereafter bring an action against the
Shareholders to recover the unpaid amount of the claim and, subject to Section
10 of this Agreement, Capital Reserve and Security National shall also be
entitled to be paid for the expense (including attorneys' fees) of bringing
such
action.
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3.
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Additional
Indemnification Rights.
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(a) Scope. Notwithstanding
any other provision of this Agreement, the Shareholders hereby agree to
indemnify Capital Reserve and Security National to the fullest extent permitted
by law, notwithstanding that such indemnification is not specifically authorized
by the other provisions of this Agreement or by statute. In the event
of any change, after the date of this Agreement, in any applicable law, statute,
or rule which expands the rights of a Utah corporation or a Missouri corporation
to be indemnified, such changes shall be within the purview of Capital Reserve's
and Security National's rights and the Shareholders' obligations under this
Agreement. In the event of any change in the applicable law, statute
or rule which narrows the right of a Utah corporation or a Missouri corporation
to be indemnified, such changes, to the extent not otherwise required by
such
law, statute, or rule to be applied to this Agreement shall have no affect
on
this Agreement or the Parties' rights and obligations hereunder.
(b) Nonexclusivity. The
indemnification provided by this Agreement shall not be deemed exclusive
of any
rights to which Capital Reserve and Security National may be entitled under
any
agreement, any vote of stockholders or disinterested directors, Utah or Missouri
law, or otherwise.
4.
Notices. All
notices and other communications hereunder shall be in writing and shall
be
deemed given if delivered personally or by courier, or mailed by registered
or
certified mail (return receipt requested) or if sent by facsimile, confirmation
received, to the respective party at the following addresses and/or facsimile
numbers, with the original thereof being mailed by registered or certified
mail,
return receipt requested (or at such other address or facsimile number for
the
parties hereto as shall be specified by like notice):
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(a)
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If
to Security National, to:
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Security
National Life Insurance Company
0000
Xxxxx 000 Xxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn: Xxxxx
X. Xxxxx, President
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
With
a
copy to:
Mackey
Price Xxxxxxxx & Xxxxxx
00
Xxxx
000 Xxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn: Xxxxxxx
X. Xxxxxx, Esq.
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
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(b)
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If
to Capital Reserve, to:
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Capital
Reserve Life Insurance Company
000
Xxxxxxx Xxxxxx
X.X.
Xxx
000
Xxxxxxxxx
Xxxx, Xxxxxxxx 00000
Attn: Xxxx
Xxxxxxxxxx, Vice President
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
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(c)
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If
to Shareholders, to:
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Shareholders
of Capital Reserve Life Insurance Company
000
Xxxxxxx Xxxxxx
X.X.
Xxx
000
Xxxxxxxxx
Xxxx, Xxxxxxxx 00000
Attn: Xxxx
Xxxxxx
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
With
a
copy to:
J.
Xxxxx
Xxxxxxxxx, CPA
0000
Xxxxxxxxxx, Xxxxx X
Xxxxxxxxx
Xxxx, Xxxxxxxx 00000
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
5.
Costs. Each
of the Parties to this Agreement agrees to bear its own costs, expenses and
attorney's fees incurred in connection with or relating to this
Agreement. No Party, therefore, has any claim against another Party
hereto for costs, expenses and attorney's fees incurred in connection with
or
relating to the preparation and negotiation of this Agreement.
6.
No Admission of
Liability. This Agreement is not intended to be, and shall not
be deemed, construed or treated in any respect as an admission of liability
by
any Party or entity for any purpose.
7.
Authorized
Representatives. Each Party that has signed this Agreement in
a representative capacity for such Party hereby represents and warrants to
the
Parties hereto that such Party is duly authorized and empowered to bind the
Party under this Agreement and to execute and enter into this Agreement on
behalf of the Party.
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8. Successors
and
Assigns. This Agreement shall be binding upon the Shareholders
and their heirs, legal representatives and assigns, and shall inure to benefit
of Capital Reserve and Security National and their successors and
assigns.
9. Severability. If
any term or provision of this Agreement shall, to any extent, be determined
by a
court of competent jurisdiction to be invalid or unenforceable, the remainder
of
the Agreement shall not be affected thereby, and each term and provision
of this
Agreement shall be valid and be enforceable to the fullest extent permitted
by
law.
10. Attorney's
Fees. In the event any Party hereto commences a legal action
or other proceeding for the enforcement of this Agreement or because of an
alleged dispute, breach, default or misrepresentation in connection with
any of
the provisions of this Agreement, the successful or prevailing Party shall
be
entitled to recover reasonable attorney's fees and other costs and expenses
incurred in the action or proceeding from the other Party, in addition to
any
other relief to which such Party may be entitled.
11. Entire
Agreement. This Agreement constitutes the entire agreement
among the Parties hereto and supersedes all prior agreements and understandings,
oral and written, among the Parties hereto relating to the subject
matter. No modification or amendment of this Agreement shall be of
any force or effect unless in writing and executed by the Party against whom
enforcement is sought.
12. Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah.
13. Counterparts. This
Agreement may be executed in counterparts, either by original signature or
by
facsimile, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one
agreement.
IN
WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have
duly executed this Agreement effective as of the day and year first above
written.
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SECURITY
NATIONAL LIFE INSURANCE COMPANY
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By: /s/
Xxxxx X.
Xxxxx
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Xxxxx
X. Xxxxx, President
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CAPITAL
RESERVE LIFE INSURANCE COMPANY
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By: /s/
Xxxx X.
Xxxxxx
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Its: President
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THE
SHAREHOLDERS:
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/s/
Xxxxxx Xxxxxx
Xxxxxxxx
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Xxxxxx
Xxxxxx Xxxxxxxx
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/s/
Xxxxxxx X.
Xxxxxx
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Xxxxxxx
X. Xxxxxx
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/s/
Xxxxxx X.
Xxxx
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Xxxxxx
X. Xxxx
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/s/
Xxxxx Xxxxxx
Xxxxx
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Xxxxx
Xxxxxx Xxxxx
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx for
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Xxxxx
X. Xxxxxx (Minor Child)
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx
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XXXXX
X. XXXXXX TRUST
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By:
/s/ Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx, Trustee
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/s/
Xxxxxxxx X.
Xxxxxx
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Xxxxxxxx
X. Xxxxxx
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Xxxxxxxx
X. and Xxxxxxxxx Xxx Xxxxxx,
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Joint
Tenants
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By:
/s/ Xxxxxxxx X.
Xxxxxx
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Xxxxxxxx
X. Xxxxxx
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By:
/s/ Xxxxxxxxx Xxx
Xxxxxx
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Xxxxxxxxx
Xxx Xxxxxx
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XXXX
X. XXXXXX TRUST
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By:
/s/ Xxxx X.
Xxxxxx
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Xxxx
X. Xxxxxx, Trustee
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/s/
Xxxxx X.
Xxxxxx
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Xxxxx
X. Xxxxxx
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/s/
Xxxxxxx X.
Xxxxxx
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Xxxxxxx
X. Xxxxxx
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